Master of Business Administration Executive
Faculty / School
Faculty of Business Administration (FBA)
Year of Award
MBA Executive Research Project
The purpose of research was to study how to develop a medium to long term SME product equity unlock (working capital purpose) under Islamic Banking model. Low share of SME with only 5% share is depicting potential areas to be exploited particularly SME which is being ignored by the overall Islamic banking industry. However given a sizeable share of trade related financing in SME sector, enormous opportunities for expansion are available to Islamic banks.
Financing towards Small and Medium enterprises has been declining since 2008 as banks being risk averse; however, SME sector’s outstanding advances recorded a rise from the beginning of year 2012. Major focus has been on short term financing with average loan size of Rs. 4 1 million for working capital needs, an inherent characteristics of SMEs whereas medium and long term financing recorded with Rs. 0.9 million and Rs. 0.5 million respectively.
With the sense of opportunity in medium and long term financing, a product with the combination of Musharaka cum Ijara is being proposed by the way of mortgage of residential and commercial property with the amount received from bank for selling the property share would be used to carry out the business activities in the existing or allied business. To avoid hassles in property transfer, heavy transactional expenses and double taxation, the asset would remain registered in the name of the customer but would be marked lien to Bank.
It is imperative to note that a vibrant SME sector would help sustain strong economic growth that would ultimately support the future growth of the overall financial sector.
Khan, U. F. (2012). Equity unlock product SME collateral based (Unpublished graduate research project). Institute of Business Administration, Pakistan. Retrieved from https://ir.iba.edu.pk/research-projects-emba/501
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